Home > Mining Week > Mining Week 08/’12: GlenStrata’s antitrust & an Indian giant

Mining Week 08/’12: GlenStrata’s antitrust & an Indian giant

February 25, 2012

Top Stories of the Week:

  • Glencore and Xstrata to seek merger approval in Brussels
    • Despite earlier statements that Xstrata and Glencore would not need to seek approval from the European Commission the parties have now decided to submit their case for approval in Brussels.
    • The companies argue that there is no significant increase in market domination because of the strong ties the companies already had prior to the merger.
    • The European Commission will now have to decide on the potential restrictions to the new company, such as the obligation to sell certain elements of the business. A market density index calculation is used to see whether or not the new company would have a too dominant position. The big uncertainty in this calculation is how the Commission will scope the market or markets the companies are active in.
    • Sources: Wall Street Journal; Financial Times; EU Merger Control Rules
  • Vedanta merges Indian assets to create Indian mining giant: Sesa Sterlite
    • Vedanta has decided to merge all its Indian assets, including Sesa, Sterlite, and Cairns India, into one big Indian company. This new Entity will be named Sesa Sterlite and will have a market capitalization of around $22bln. Vedanta will hold just under 60% of the shares.
    • Sources: Times of India; Economic Times; Vedanta presentation
  • Tavan Tolgoi plans to list in June
    • The Mongolian government plans to list a significant part of Tavan Tolgoi, a large coking coal project in the south of the country, in both London and Hong Kong this summer. Regulatory issues threaten to delay the HKEx listing.
    • The government plans to eventually hold 51% of the shares, give 20% to the population, sell some 10% to local business at a discount, and make the rest available to international investors. A significant part of the 20% given to the population might find its way to international investors.
    • Sources: Wall Street Journal; FOX Business

Trends & Implications:

  • The creation of Sesa Sterlite builds both a second diversified miner with a significant oil & gas business (next to BHP Billiton) and a second diversified miner with a significant interest in zinc (next to Glencore/Xstrata).
  • If Vedanta manages to both make the merger integration of the 7 or more individual companies a success and to manage its investments in other developing countries successfully, it creates the primary candidate to become the stable Indian mining giant. Growth of the Indian industry is phenomenal but faces many challenges. The mixture of a very strong Indian foothold with high growth assets in many other developing countries could prove to be a good basis for risk diversification.

©2012 | Wilfred Visser | thebusinessofmining.com

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